AT every turn of the century, there will always be ground-breaking innovation that changes the landscape of civilisation. The profound changes while it starts small, will creep silently into our everyday life making it an eventual norm.
When Edison Electric Light Company, backed by renowned financier and banker John Pierpoint Morgan (J P Morgan) and the Vanderbilt family, first introduced to the world to the possibility of electricity power generation for household consumption, to many, it was too good to be true.
During Thomas Edison’s first public demonstration of his incandescent light bulb on Dec 31, 1879, he said, “We will make electricity so cheap that only the rich will burn candles.” Fifteen years later, 219 Madison Avenue, the home of J P Morgan became the first electrically lit private residence in New York on April 12, 1894.
It was during the wedding reception of Juliet Morgan and William Pierson Hamilton, in the presence of 1,000 people, that Thomas Edison’s vision became a reality.
Fast forward to today, another wave of innovation in the space of electricity power generation has been sweeping across the globe. This time, it is in the shape of compact battery within a vehicle.
Electric vehicles, commonly referred to as EV, is at the forefront of mass adoption by consumers. This is why the EV industry and its ancillary sectors are the flavour of the day when it comes to investment, financing and even policy making. So long as it concerns E.V, everyone wants a piece of the pie and no one seems to be able to get enough of it.
I even remembered this instance, where I was in an advanced discussion with a top German engineering and automation corporation to set up their autonomous driving and EV research centre in Malaysia.
Singapore’s Ministry of Industry and Trade officials then went all out to sway them to set up in the city state instead. The tax incentive and subsidies proposed by the Singapore government eventually proved too good to refuse.
Interestingly, finance is always at the heart of innovation. While financial professionals are not creative enough to invent or innovate a life-changing product for the betterment of the people, there is no doubt financial markets have an eye for innovation.
Of course, the tailwinds of climate change and sustainability movements around the world have become the fuel to fire this innovation.
From increasingly wide adoption of ESG standards by asset and funds, rise of Green bonds and sustainable financing programmes, nothing can stop this wave.
Yet, beneath the rah-rah, I can’t help but wonder about the risk of “Greenwashing”, “Greenflation” and willful blindness towards the balance of pragmatism and ideals.
Let’s take EV as an example. This innovation is hell-bent on replacing fossil fuel altogether. Reducing carbon footprints and eradicating “dirty fuel” is on the utmost priority list of most governments.
During the 2021 United Nations Climate Change Conference, commonly known as COP26, 24 countries and 11 automakers signed the declaration to accelerate the transition to 100% emission free vehicles.
Notably absent though were leading automobile producing countries including Germany, the US, Japan and China which have yet to commit. As most governments set carbon neutral policies by 2030 or 100% EV by 2050 policies, what happens in the course of pursuit of this agenda?
Credit Suisse Europe Equity Research released a very interesting ESG research report on Nov 12, 2021 which detailed how they commute a round trip via EV instead of using a plane or petrol vehicle from London to Glasgow for COP26.
Spanning 1,355km, the author of the report had to stop a total of seven times with each charge time requiring one hour as compared to petrol vehicle which would require only three refills at most and not more than few minutes for each pump. In addition to charge and range anxiety, there were also cost concerns where the cost of a round trip flight would be £210 (RM 1166) while the cost of using an E.V would come up to £476 (RM 2642) which includes car rental, one night stay, electricity charges, toll cost etc. Definitely, the carbon footprint of E.V would require only three mature trees to offset as compared to eight mature trees for flying.
Apart from the need for the E.V sector to improve in terms of the battery and charging technology, which advancement of science would undoubtedly address the issue, there is still the question of efficiency and the most crucial being the charging infrastructure. Admittedly, I foresee a potential for petrol stations network to eventually be converted into charging stations or part charging facilities. Until then, E.V for mass adoption may be at best suited for inner city commutes and not long distance travels.
Having said that, what I find as an irony is the notion where advocates of E.V and green movements failed to recognize the source of electricity from the grid may be powered from coal and other less desirable source. The repeated charge runs takes up substantial power from the grid which would otherwise be used more efficiently for other purposes. There is some level of hypocrisy here not unlike when the richest man in the world and inventor of Tesla promoted bitcoin heavily in spite of the damming environmental damaged caused from both legal and illegal mining of the cryptocurrency.
Then there is the whole other spectrum of actual mining problems and social ills revolving the raw materials required for the manufacturing of E.V batteries such as tin, copper, cobalt, nickel etc. There would appear to be large shift and investment focus including money flow to countries which produces these in-demand and green commodities. How about countries which are “undesirable” commodities producing nation, would the international community start to shun them and cast these countries into oblivion after decades of milking their commodities supply to develop their own nation? Where do the countless labour force in coal mining, oil & gas or iron ore turn to and how can their family subsist?
My underlying fear is the potential zero sum game in the event an extreme approach is taken. Ultimately, what matters to me is neither the green theme nor the black oil. I am a strong believer in sustainability which means a balance must be struck. In Europe and United States, hybrid vehicles are not as popular. Demand seems to be at extreme ends where consumers opt for only full E.V or petrol vehicle. Hybrid vehicle on the other hand are very popular in Asian countries. There are arguments that this is only because car manufacturers in this part of the world choose to capitalize on tax breaks and incentives by producing hybrid vehicles. I beg to differ. Possibly in the near to midterm, literally a “hybrid” model is the best way for to truly serve the interest of the people. This is at least until technology catches up or a healthy balance is struck. To be honest, before reading this insightful Credit Suisse report or news reports on how road users in China were fight over charging stations during their travels in the “Golden Week” holidays, Dr. Neoh Soon Kean has highlighted this complex issue to me in a conversation.
With the recent conclusion of COP26, it would appear that major progress have been made since the 2015 Paris Accord. Even as the banters between United States and China on who is the world’s biggest polluter are making headlines, I cannot help but be assured that this is one issue most countries are able to be on the same page and practice some level of multilateralism. My only caution to policy makers and even investors in the financial markets would be to avoid being overeager and neglect the potential to do things better.
A balance and gradual approach, such as a hybrid model could be more sustainable in the long run. This is not only in the context of transportation but also the macroeconomic impact. I genuinely believe that sustainability is and should be the main force of innovation. And sustainability requires moderation.
Ng Zhu Hann is the author of “Once Upon A Time In Bursa”. He is a lawyer and former chief strategist of a Fortune 500 Corp. The views expressed here are his own.